-LRB- CNN -RRB- -- College costs too much , both for students and for society as a whole .

This year , according to the College Board , average published in-state tuition and fee plus room/board charges exceed $ 17,000 at four-year public institutions , a 6 % increase from only one year earlier .

In 2009 , spending by Americans for post-secondary education totaled $ 461 billion , an amount 42 % greater than in 2000 , after accounting for inflation . This $ 461 billion is the equivalent of 3.3 % of total U.S. gross domestic product -LRB- GDP -RRB- and an amount greater than the total GDP of countries such as Sweden , Norway and Portugal .

The public is taking notice . The Occupy Wall Street protesters have featured student debt forgiveness as one of their demands , and students in California have demonstrated several times in the past year after their tuition was raised twice .

Earlier this week , U.S. Secretary of Education Arne Duncan addressed some of these concerns in a speech where he urged colleges to get serious about their cost problem . But there 's only so much the federal government can -LRB- and should -RRB- do . The underlying structure of American higher education needs dramatic reform before there will be any relief in sight .

Whereas private businesses cut prices for consumers and costs to themselves through efficiencies that increase profits and incomes , universities lack those incentives .

Indeed , the typical successful university president views his or her key constituencies not to be the customer -LRB- students and their parents who pay tuition charges or the granters of research funds -RRB- , but rather others -- the faculty , important alumni , key administrators , trustees and occasionally politicians . They please these constituencies by raising , and then spending , lots of money .

They effectively bribe powerful faculty with low teaching loads , high salaries and good parking . They give the alumni successful intercollegiate athletic programs that are expensive and usually financed off the backs of students . They give trustees whatever they want , no matter how costly or eccentric .

Universities do a second thing unheard of in the private sector -- they often deliberately turn customers away .

A fast food chain or discount store succeeds by selling more hamburgers or television sets ; no customer was ever kept from spending money at McDonald 's by an `` admissions office . '' Yet for American universities , the `` bottom line '' is measured by college rankings that often reward schools for turning people away , becoming more `` selective . '' Many believe the Ivy League offers the best education in the world , so why do we encourage those elite institutions to deny access to thousands of highly qualified students every year ?

Like health care , prices are rising rapidly for higher education because of the predominant role of third-party payments -- federal student loans and grants , state government support for institutions and students , private philanthropic gifts and endowment income . College seniors who borrow to finance their education now graduate with an average of $ 24,000 in debt , and student loan debt now tops credit card debt among Americans . When some else is paying a lot of the bills , students are less sensitive to the price , thus allowing the colleges to care less about keeping prices under control . And the nonprofit nature of institutions reduces incentives for colleges and universities to be efficient .

The key to getting costs under control is contained in three words that begin with the letter `` I '' -- information , incentives and innovation .

Customers are ignorant of college outcomes because we do not measure in any coherent and consistent manner what students actually learn , how well they do after graduation or whether they think better in a critical manner as a result of the college experience . Even basic financial information on how colleges spend money is often not fully shared with trustees or key politicians who help fund or oversee college operations .

As mentioned above , incentives to conserve resources are few . Once , as a department chairman , I successfully battled for more faculty members to do the same amount of work , thus lowering productivity . The result ? My faculty evaluated me highly so I got a nice raise . Where else do the employees get to decide who their bosses will be or how much they will be paid ?

If information and incentives are provided , innovation will come . Already , we know several online and other innovations can work to deliver high-quality education services at potentially lower prices . Duncan highlighted Western Governor 's University , a nonprofit online institution , as one such example .

Nondegree forms of education need more emphasis , since the number of college graduates exceeds the number of jobs available in occupations for which degrees historically have been desirable -- jobs in the managerial , technical and professional areas . According to data from the Bureau of Labor Statistics , in 2008 some 29.7 % of flight attendants , 24.4 % of retail salespersons and 17.4 % of baggage porters had a bachelor 's degree or higher .

According to my analysis of the data , more than 17 million college graduates were `` underemployed '' in 2008 . Surely these people needed some form of post high school training , but an expensive four-year degree may not have been the best approach . Rather , perhaps we should be encouraging some students to develop skills at lower costs by utilizing innovative free courses provided by groups such as the Saylor Foundation and Khan Academy .

College costs can not rise faster than income forever -- we can not afford it . Necessity is the mother of invention . Like it or not , American higher education is in for big change in the next generation .

The opinions expressed in this commentary are solely those of Richard Vedder .

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College costs are rising much faster than inflation

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Richard Vedder says colleges do n't pay attention to real customers -- students

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He says incentives need to be changed and innovation encouraged

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Vedder : America 's colleges and universities will look very different in coming years